Hotelbeds: Year-end review and forecast trends for 2019

The biggest challenge for travel intermediaries and distributors is to stay relevant to hotels. But for many people in this space, the copycat model is becoming increasingly harder to justify, as they are not delivering extra value to hotels.

Tech provider and distributor Hotelbeds has released industry comments and insights about the year in travel and its forecasts for 2019. Speaking on behalf of the company are Sam Turner, global director of sales and sourcing, and Peter Mansour, director of product management.

** Sam Turner, global director of sales and sourcing

Intermediary market for hotel sales strengthened in 2018 and the trend will continue

“This has been yet another year where growth in the intermediary market for hotel sales has outstripped the growth in the direct channel for the hotels. This is in part because the three largest OTAs globally – Expedia, Booking and Ctrip – are growing at double the rate of the direct channel.

“The trend for intermediaries growing their share of hotel sales vs the direct channel will continue into 2019 and beyond. It shows that consumers are generally more comfortable – for a range of reasons – with buying from intermediaries and on balance favour that over going to a hotel dot com.

“But selling your hotel content via an intermediary doesn’t mean that the big OTAs are the only option. A good bedbank can offer you access to intermediaries that don’t compete with your direct channel, such as airlines, points redemption schemes, MICE buyers, tour operators and more. Just as importantly, these channels offer quality customers: more advanced bookings, less cancellations, higher in destination spends, and higher return rates.”

Consolidation across the whole accommodation sector set to continue

“Consolidation has been a key part of the accommodation sector over the last twelve months and will continue in 2019. Both investors and owners have recognized that the sector is just way too fragmented.

“This explains not just the mega deals of recent years, but also the medium-sized chain deals of this year such as Minor Group acquiring NH and Accor acquiring Mövenpick – as well as the constant acquisition of smaller brands and start-ups by Accor and other major chains.

“The bedbank sector too remains highly fragmented and this explains the rationale behind our acquisition of both Tourico Holidays and GTA last year, with both companies now almost fully integrated into our business and their brand names now being phased out. We’re not the only people in this sector following this philosophy, just look at the activity of Webbeds and their recent acquisitions, right up to a few weeks ago.

“The biggest challenge for travel intermediaries and distributors is to stay relevant to hotels. But for many people in this space, the copycat model is becoming increasingly harder to justify, as they are not delivering extra value to hotels. This perhaps also explains some of the consolidations, as people throw in the towel and sell-up or simply go out of business.”

Another year in which hyped up new technologies didn’t deliver… yet

“All of the buzz and hype from last year around artificial intelligence and voice search has failed to deliver this year – as is often the case with the latest trends, the reality is that they take much longer to implement than was originally foreseen.

“In the short term the result has been a bit disappointing, and not just in terms of voice search: ultimately you really still have to sit down at an actual computer to fully plan and book any trip, as even on a mobile it is not quite as easy as many had hoped.

“For sure both AI and voice search will be relevant in the medium term. But in the short term we need to be more realistic and perhaps 2019 will be a year in which our expectations will slowly begin to match the more slowly developing reality: small improvements and changes, not a quantum leap.”

Noteworthy breakout brands and individuals this year… OYO Rooms

“Perhaps the most interesting development in the hotels space this year has not been a piece of technology or from the distribution space.

“OYO Rooms has come out of nowhere to raise huge sums, around a billion dollars at the last round, to create a more level playing field for small independent properties. Already it is the fastest growing hotel company in the world and will soon be a global chain. No one could have anticipated a new competitor emerging so quickly. It goes to show that the sector still has room for more innovation that many would have imagined.”

Alternative accommodation sees slowdown in growth

“Last year everyone was still assuming that the alternative accommodation sector would just keep growing exponentially. But this year has seen a massive slowdown in growth and we expect that to continue. The likes of Airbnb are still growing well, of course, but nothing like before.

“This perhaps explains why such providers are now trying to expand into other areas, such as cross-selling ancillaries or ‘experiences’. They are realising that ultimately they are intermediaries, just another sales platform – and in that respect, they are becoming more like OTAs.”

The Chinese outbound market remains largely untapped

“Everyone in tourism with a strategy team or demanding investors to keep satisfied knows that the explosion of Chinese outbound tourism represents an enormous opportunity. The demographic shift in China as people become middle class and aspire to travel internationally means that we´ll see exponential growth in the PAX figures for many years: in the coming two years alone the Chinese passport office will issue 100m new passports.

“But 2018 was another year in which global hoteliers once again failed to fully capitalise on the Chinese segment. Many hoteliers are still playing catch-up here and few are fully ready to cater for Chinese travellers. Could this change in 2019? Right now too many hotels don’t accept AliPay, cannot show floor plans in the booking process, or have no visa support service in the Chinese language – the sector is improving, but 2019 is probably not the year most hotels will crack the Chinese outbound market.”

“The growth in recent years in the number of smaller hotel distributors offering ever larger amounts of hotel rooms available for sale is both unsustainable and not in the interest of consumers. Whilst it will probably continue in 2019, over the longer term this is likely to change.

“These distributors are increasing the number of rooms they have available simply by signing contracts with re-sellers and are not offering directly contracted rates. Every extra link in the hotel distribution chain adds a cost that is ultimately paid for by consumers. Not only are these distributors not adding value, often this approach is not even sustainable for them in the long-term.

“Why are they doing this? Right now the distribution industry is consolidating into larger players who have the scale and directly contracted hotel rates. This means that the smaller players are essentially now looking for any extra revenue opportunity, no matter how small. But fast forward a few years and you´ll notice a great deal less small distributors offering ‘500,000 hotels’ at trade shows like ITB or WTM – they´ll either shrink back down to whatever their core offering really is, or go out of existence.”

More and more airlines are moving into the hotel intermediary space – and in some cases even tour operator space – to increase revenues

“Over the last few years, we’ve seen a trend for airlines approaching us to start selling hotel accommodation on their website. In 2018 this has increased, but we predict that in 2019 it really will begin to snowball.

“As airlines look to diversify their revenue sources and increase their margins, the opportunity to cross-sell a loyal customer a hotel room offers potentially more profit than operating the flight itself.

“In particular, however, what we are seeing is more and more airlines wanting to go a step further still and actually become a tour operator: offering a complete package to customers by giving them a combination of a flight and hotel – with all the regulatory and operational implications that means, but also the opportunity to cross-sell the customer more products: car hire, transfers, theatre and sports tickets, etc.

“In 2018 we have secured many such partnerships with airlines and have many more in the pipeline for 2019.”

Service will slowly become the key differentiator for hotels, not price – helped by technological innovation

“The general trend towards greater price transparency and efficiency for hotel accommodation – helped significantly by the advent of metasearch – means that hotel rooms are increasingly becoming more and more commoditised, in the same way airline tickets have been for many years.

“So how does a hotel stand out in such a price sensitive market? Service has always been a differentiating factor, but as time goes on it becomes an ever more important one.

“In 2019 we´ll see this shift accelerate slightly as artificial intelligence and bots become used more frequently by pioneering hotels to improve customer service all round, and not just in the booking process. But achieving this is going to be harder said than done, only the most innovative will succeed – and many will fall behind.”

Trend for greater price transparency driven by metasearch is leading to a technological arms race

“The impact of metasearch pushes us towards greater price transparency and efficiency, which is great news for consumers. For both hotel providers and travel selling intermediaries however, not only does this drive down margins it also makes it harder to compete to actually make that sale.

“It is a merciless market out there for those competing on price alone and this is leading to a data-analytics arms race in our sector as providers compete to have the fastest and best pricing technology to outwit the competition.